If you're searching for stocks that may split, you've got good reason to do so. Stock prices tend to rise immediately following a split transaction. Companies use any number of split ratios, but the most common ratio is 2-for-1. In a 2-for-1 split, the number of shares outstanding doubles while the stock price is cut in half. A stock split doesn't alter the value of investors' holdings, but it makes the entry point to own shares cheaper. You can make a post-split investment in a stock that otherwise might have been out of your price range.
Form a List
Identify companies in the stock market with the most expensive stock prices. A single share of the most expensive stocks can be worth hundreds or thousands of dollars.
Find out if those pricey stocks have ever issued stock splits in the past. You can learn this type of information on the investor relations page of a company's website.
Separate the high-priced stocks that historically have performed stock splits from those that have not. While a pattern of splits does not guarantee there will be another one, at least you've learned that a management team is not averse to stock splits.
Stay mindful that splitting shares is not mandatory and comes at the discretion of corporate executives, boards of directors and shareholder votes. While technology company Apple has executed several stock splits, the company's board of directors eventually decided that stock splits were not beneficial even after the stock was trading at more than $500 per share, according to a 2012 Bloomberg Business Week article.
Follow the Signs
Read press releases of the companies that are on your radar screen for a potential stock split. It's not unusual for a company to announce a potential stock split in conjunction with a quarterly earnings report. Hunt for these clues in the earnings press releases, which are scheduled announcements.
Listen to a company's quarterly earnings conference call hosted by the management team. Split transactions are generally contingent on receiving further support from current investors. You're likely to learn details about a possible split, such as the scheduled date for a shareholder vote, in a call hosted by executives.
Follow the developments once a company declares a stock split. Remember: stock splits don't occur overnight, so you'll have time -- sometimes months -- between the date of the proposal and the actual split.
Pay attention to what other investors are saying. If you're a current investor, this would involve attending shareholder meetings hosted by the company you're invested in. It may also require watching some TV business news programs.
Ask the company yourself if a stock split might be in the future. You can contact the investor relations department with the information provided on the company's website. In 2012, technology company Google decided to perform a stock split as a result of inquiries it received from investors looking for a more affordable stock price.
Don't count out companies that have never before performed a stock split. Berkshire Hathaway, one of the stock market's most expensive stocks, is a company that was founded in the 19th century. Chief executive officer Warren Buffett waited until 2009 to perform the company's first stock split -- a 50-for-1 split that brought the price for shares down from $3,500 per share to under $70 per share.
- Stock prices rise gradually, so it may take months or years before companies decide to perform stock splits.
- Look for stock prices that double in value over time for potential stock splits.
Geri Terzo is a business writer with more than 15 years of experience on Wall Street. Throughout her career, she has contributed to the two major cable business networks in segment production and chief-booking capacities and has reported for several major trade publications including "IDD Magazine," "Infrastructure Investor" and MandateWire of the "Financial Times." She works as a journalist who has contributed to The Motley Fool and InvestorPlace. Terzo is a graduate of Campbell University, where she earned a Bachelor of Arts in mass communication.